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PublicSupply Plan Optimization with theSAP IBP S&OP OptimizerChristoph Eckert, SAP SCM Optimizer DevelopmentGurobi User Conference, Feb 06, 2017

AgendaHistory of Optimization at SAPSAP Integrated Business Planning for Sales and Operations Planning (SAP IBP S&OP)S&OP Model and FeaturesSome FiguresSummary 2017 SAP SE or an SAP affiliate company. All rights reserved.Public2

History of Optimization at SAP

Optimization at SAPThe 90’sFirst optimization engines built end of the 90’sOptimization for SCM in SAP Advanced Planning and Optimization (SAP APO) Production Planning & Detailed Scheduling (PP/DS) Supply Network Planning (SNP)– MILP approach using commercial solver Deployment– MILP approach using commercial solver Transportation Planning / Detailed Scheduling (TP/VS) Model Mix Planning (MMP)– MILP approach using commercial solver Sequencing (SEQ) 2017 SAP SE or an SAP affiliate company. All rights reserved.Public4

Optimization at SAPThe 2000’sAdded further applications in the 2000’sFurther components of SAP APO Capable to Match (CTM)SAP Transportation Management (SAP TM) Vehicle Scheduling and Routing (VSR) Carrier Selection (CS)– MILP approach using open source solver with commercial licenseSAP Multiresource Scheduling (SAP MRS) – Planning of Technicians 2017 SAP SE or an SAP affiliate company. All rights reserved.Public5

Optimization at SAPThe 2010’sMore engines using (MI)LP since the 2010’s All using open source solver with commercial licenseGenios – Optimization on SAP NetWeaver– Customer projects, e.g. “Trim Optimization”SAP Integrated Business Planning for Sales and Operations Planning (SAP IBP S&OP)Optimization Function Library (OFL) – Optimization on SAP HANA– e.g. “Retail-Assortment-Planning”And more other enginesSAP Transportation Management - Load Planning (SAP TM LP)SAP Integrated Business Planning for Response (SAP IBP Response)SAP Transportation Management – Load Consolidation (SAP TM LC) 2017 SAP SE or an SAP affiliate company. All rights reserved.Public6

Optimization at SAPSAP chooses GurobiSAP chooses Gurobi as new OEM PartnerJune, 2016 – SAP, the leading enterprise software provider in supply chain management, has chosenGurobi as an OEM partner. As a result of this agreement, the Gurobi Optimizer has been integratedinto the SAP Integrated Business Planning (SAP IBP) and Advanced Planning and Optimization (SAPAPO) solutions to solve complex optimization problems. In addition, the Gurobi Optimizer enabled aseamless integration into the SAP HANA ews/sap-chooses-gurobiApplications using Gurobi as solver SAP APO – SNP and Deployment (replacing other commercial solver) SAP IBP S&OP (replacing open source solver)Enhancements for SAP HANA platform Memory handling Thread handling 2017 SAP SE or an SAP affiliate company. All rights reserved.Public7

Optimization at SAPSAP chooses GurobiEffort for switching solver to Gurobi Implementation of API-mapping internal (MI)LP representation – GUROBI model and solver (effortalready done some time ago, only technical mapping on API basis) Intensive tests on a set of approx. 1000 scenarios – Compare time to optimum or solution qualityafter given runtime, depending on customer setting 86% w/o problems: 52% comparable, 34% better results9% solved using Gurobi tuning tool (most times default setting was sufficient) or mapping of previous solverspecific parameters to similar Gurobi solver parameters (e.g. MIPFocus, ScaleFlag, NumericFocus, )Only few scenarios not ‘solved’ by intensive tuning, some large scenarios not tried to tuned at all Very few problems at customers, merely in cases using special solver parameters with the old solver, butsuch scenarios had intense parameter tuning for the old solver which we didn’t nowAfter productive switch only few problems with regards to the change, most could be solved on ourown using experience from tests, only very few needed help from Gurobi support, which reactedvery quickly and proposed a solution 2017 SAP SE or an SAP affiliate company. All rights reserved.Public8

SAP Integrated BusinessPlanning for Sales &Operations Planning

SAP Integrated Business PlanningWhat is IBP?Tom Wallace DefinitionIntegrated Business Planning is a set of decision-making processes to: Balance demand and supply Integrate financial planning and operational planning Link high-level strategic plans with day-to-day operations“Integrated Business Planning (IBP) is the business planning processfor the post-recession era, extending the principles of S&OPthroughout the supply chain, product and customer portfolios,customer demand and strategic planning, to deliver one seamlessmanagement process.” 2017 SAP SE or an SAP affiliate company. All rights reserved.Public10

SAP Integrated Business PlanningHigh Level Solution ArchitectureSAP Integrated Business PlanningExcel: PlanSAP HANA APOBWOut-of-the-box orconfigured IntegrationBPCData Services or HCICRMWeb UIsftp httpsERPAny othersystemFilesSales/MarketingIBP Model & EngineAttributesKey FiguresScenarios & SimulationPredictive AnalyticsHeuristics & OptimizationProcess WorkflowAlertsWeb: AnalyzeDemandPlanningFinanceSAP Jam Mobile: AnalyzeSupplyChainSocial CollaborationExecutives 2017 SAP SE or an SAP affiliate company. All rights reserved.Public11

SAP Integrated Business PlanningSolution ComponentsChallengePossible Deployment PriorityStruggling to synchronize supply anddemand?SAP Integrated Business Planningfor Sales and OperationsDifficult to determine optimal inventorylevels that support your high customerservice level - across the network?SAP Integrated Business Planningfor InventoryUnable to manage and plan across thecomplex supply network?SAP Integrated Business Planningfor SupplyInability to sense actual demand for ashort-term horizon?SAP Integrated Business Planningfor DemandNeed to respond to short term changes insupply and demand?SAP Integrated Business Planningfor ResponseSupply Chain Control TowerSales & Operations PlanningDemandInventoryResponse &SupplySAP HANA PlatformLack of visibility and information to analyze SAP Supply Chain Control Towerand manage the end-to-end supply chain? 2017 SAP SE or an SAP affiliate company. All rights reserved.Public12

SAP IBP for Sales & Operations PlanningSales and Operations Planning ProcessTypical Process1. Demand Consensus Demand Planning and New Products Input from Sales, Marketing, Finance, Operations including quantity, price,revenue and margin2. Supply Based on updated demand plan, understand capacity and material impactsincluding contract manufacturing Understand long term gaps in supply and demand3. Balance Review and resolve outstanding supply issues Compare constrained plan with finance plan Define and compare scenarios4. Executive Review Escalate resolution plans with scenarios if applicable Review key changes since last meeting 2017 SAP SE or an SAP affiliate company. All rights reserved.RepeatMonthlyPublic13

SAP IBP for Sales & Operations PlanningWeb UI used for Analytics 2017 SAP SE or an SAP affiliate company. All rights reserved.Public14

SAP IBP for Sales & Operations PlanningExcel UI used for Planning 2017 SAP SE or an SAP affiliate company. All rights reserved.Public15

S&OP Model and Features

SAP IBP Sales & Operations PlanningThe Model – Master and Operational DataMaster Data Model Location (Plant, DC, Supplier, .) Lane Product Production Process Model (PPM) ResourceOperational Data (Time Series) Demands Orders Capacity ProfilesResourceProduct 2017 SAP SE or an SAP affiliate company. All rights reserved.SupplierPlantDCCustomerPublic17

SAP IBP Sales & Operations PlanningThe Model – FeaturesProduceDiscrete LotsMinimal LotsFix Costs and Cost RateTransportTransportCapacityDiscrete LotsMinimal LotsFix Costs and Cost fety StockStoreSatisfy DemandProcureFix Costs and Cost Rate 2017 SAP SE or an SAP affiliate company. All rights reserved.Delay CostsNon-Delivery CostsPublic18

SAP IBP Sales & Operations PlanningThe Model – Typical Supply ChainMFG 2011SUP 30141Multi-levelBOMCustomer 1A6ADC 101543ACustomer 2ASUP 302DC 102MFG 2021454Multi-levelBOM5Location 2017 SAP SE or an SAP affiliate company. All rights reserved.AAA6Customer ePublic19

SAP IBP Sales & Operations PlanningConstraints - ExamplesStock balance equation:𝑺𝒕𝒐𝒄𝒌 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕 𝑺𝒕𝒐𝒄𝒌 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕 𝟏 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕𝑷𝒑𝒎 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝒑𝒑𝒎 𝒏𝒆𝒆𝒅𝒔𝒊𝒏𝒑𝒖𝒕, 𝒑𝒓𝒐𝒅 𝒙, 𝒍𝒐𝒄, 𝒕 𝒍𝒆𝒂𝒅𝒕𝒊𝒎𝒆𝑷𝒑𝒎 𝒏𝒆𝒆𝒅𝒔𝒊𝒏𝒑𝒖𝒕 𝑷𝒓𝒐𝒅 𝒙 ���, 𝒇𝒓𝒐𝒎𝒍𝒐𝒄, 𝒍𝒐𝒄, 𝒕) ��𝒐𝒓𝒕 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕𝒐𝒍𝒐𝒄, 𝒕 ��Maximum inventory:𝑺𝒕𝒐𝒄𝒌 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕 ��(𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕) ��𝒆𝒗𝒆𝒍(𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕)Inventory target:𝑺𝒕𝒐𝒄𝒌 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕 ��𝒐𝒄𝒌(𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕) ��𝒆𝒕𝑳𝒆𝒗𝒆𝒍(𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕) 2017 SAP SE or an SAP affiliate company. All rights reserved.Public20

SAP IBP Sales & Operations PlanningConstraints - ExamplesMinimum and maximum 𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕) ���, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕)resp.𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕 𝑴𝒊𝒏𝑳𝒐𝒕 𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕 ��(𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕)𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕 𝑴𝒂𝒙𝑳𝒐𝒕 𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕 ��(𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕)Maximum:𝟎 ���, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕) 𝑴𝒂𝒙𝒊𝒎𝒖𝒎(𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, ��� 𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕 𝑺𝒍𝒂𝒄𝒌𝑳𝑩𝑷(𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕) 𝑴𝒊𝒏𝒊𝒎𝒖𝒎(𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕) 2017 SAP SE or an SAP affiliate company. All rights reserved.Public21

SAP IBP Sales & Operations PlanningConstraints - ExamplesResource 𝒓𝒆𝒔 𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕) ���𝒔, 𝒕)𝑹𝒆𝒔 𝒑𝒑𝒎Minimum resource ��(𝒓𝒆𝒔 𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕) ���𝒔, 𝒕) ��𝒏(𝒓𝒆𝒔, 𝒕)𝑹𝒆𝒔 𝒑𝒑𝒎Fix costs:𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕 𝑩𝒊𝒈𝑴 ��(𝒑𝒑𝒎, 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕)Demands:𝑫𝒆𝒎𝒂𝒏𝒅 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕 𝑫𝒆𝒍𝒊𝒗𝒆𝒓𝒆𝒅 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕 𝑳𝒂𝒕𝒆𝑫𝒆𝒍𝒊𝒗𝒆𝒓𝒚 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕, 𝒍𝒂𝒕𝒆 𝒕 𝑵𝒐𝒏𝑫𝒆𝒍𝒊𝒗𝒆𝒓𝒚 𝒑𝒓𝒐𝒅, 𝒍𝒐𝒄, 𝒕𝑳𝒂𝒕𝒆 𝒕 2017 SAP SE or an SAP affiliate company. All rights reserved.Public22

SAP IBP Sales & Operations PlanningCostProduction, Transport and Procurement Fix cost Cost rate Violation cost rate for minimum and adjusted values (pseudo hard)Resource Minimum resource capacity utilization violation cost rateInventory/Stock Holding Inventory holding cost rateMaximum inventory violation cost rateSafety stock violation cost rateMinimum and maximum coverage violation cost rateDemand Non delivery cost rate Late delivery cost rate 2017 SAP SE or an SAP affiliate company. All rights reserved.Public23